Study: For Sale By Owners Don’t Save Real Estate Commission

Study: For Sale By Owners Don’t Save Real Estate Commission

One of the main reasons why For Sale By Owners (FSBOs) don’t use a real estate agent? They believe they’ll save the commission an agent charges. A study by Collateral Analytics, reveals that FSBOs don’t actually save anything. Resulting in some cases costing themselves more, by not listing with an agent.

Study: For Sale By Owners Don’t Save Real Estate Commission

They analyzed home sales in different markets in 2016 and the first half of 2017. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales. In many cases below the average differential represented by the prevailing commission rate.” (emphasis added)

Why would FSBOs net less money than if they used an agent?

The study makes several suggestions:

• “There could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales. Particularly buyers who rationalize lower-priced bids on with the logic that the seller is “saving” a traditional commission. Resulting in buyers searching for and targeting sellers who are not getting representational assistance from agents.” Most noteworthy, ‘bargain lookers’ might shop FSBOs more often.
• “Experienced agents are experts at ‘staging’ homes for sale”. Consequently, this expertise could result in more money for the home.
• “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” As we know, the more buyers that see a home, increases chances for a bidding war.

Study: For Sale By Owners Don’t Save Real Estate Commission

Three conclusions from the study:

1. FSBOs achieve prices significantly lower than similar properties sold by Realtors using the MLS.
2. The differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
3. Most noteworthy, sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.

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Kris and Kim Darney – REALTORS® – Grandparents – 909.985.9392 – CA BRE# 01930954; 01464957; 01458057